Hope for health insurance

The rising cost of health care is nothing short of a crisis for many farm families, with premiums well over $1,000 per month for some.

How serious is the problem? An Iowa survey found that health insurance is one of farmers' top three concerns, along with commodity prices and government regulation. In a Wisconsin poll, farmers said health insurance is their number-one concern, even more important than the price for grain or milk.

Insurance premiums have gone sky high while coverage has been reduced. What makes things worse still for farmers, compared to other workers who are self-employed, is that some insurance companies consider farming to be a high-risk profession. In addition, farmers, like self-employed workers everywhere, pay higher rates than employees who work for companies that offer group plans.

However, there are new insurance programs that offer hope:

Plans to create insurance “cooperatives” in at least two Midwest states that allow farmers to join groups that offer competitive rates and good coverage.

Partnerships between farm organizations and major insurance providers, which allow farmers to be part of groups that number in the tens of thousands.

The key word here is “group.” These plans allow farmers to become part of a group that offers good benefits and prices, so they are not a group of one.

Wisconsin co-op

It has taken years of hard, and at times frustrating work, but this January, one Wisconsin farm co-op member in one county will likely be offering farmers group insurance “and that will grease the skids for others,” says Melissa Duffy, director of government relations for the Wisconsin Federation of Cooperatives. Also very close is a plan in another county that will offer group insurance to workers in small businesses, in which farmers could participate.

“This has definitely not been an easy project. Nothing in health insurance happens quickly,” Duffy says.

The co-op federation got involved in the issue when a 2002 University of Wisconsin study found that 18% of dairy farmers had no health insurance and 41% did not have health insurance for everyone in their family. The study also found that farmers pay more than twice as much as other self-employed workers and more than three times as much as salary earners.

“We looked at that and thought something had to be done. We went to the legislature and got a bill passed that allows us to form health co-ops so farmers can be part of a group,” Duffy says. “But what we found out five years later is that farmers have responded to the crisis by having a spouse — typically the farm wife — get a job off the farm. What our new survey is telling us is that there is still a huge problem, but it's different than we thought.” Forcing spouses off the farm just for insurance contributes to the growing farm labor shortage and to the decline in farm numbers, in Duffy's view.

The survey conflicts with the often-repeated statement that one-third of farmers are without health insurance. The poll of AgStar Farm Credit Services and Badgerland Farm Credit Services found that, of about 1,000 completed interviews, only one farmer was uninsured. But more than half of respondents said they were covered through an outside employer policy, with about one-third covered through individual coverage.

Sending the spouse to work off the farm “will no longer solve the problem,” Duffy says, for two key reasons: Spousal policies are starting to exclude farm injuries for coverage, and such policies are starting to exclude other family members from coverage, period.

The only state program available to some Wisconsin farmers is the Health Insurance Risk Sharing Plan, a pool for high-risk people who can take part if rates go up by 50% or if they are denied insurance. Duffy says that a statewide co-op solution has not yet been reached, “but we'll keep trying until it happens.”

Minnesota plan

The Minnesota Association of Co-ops is also working on creating a co-op that could allow farmers to join a pool. “We have been working on it five or six years. It's an ongoing project, but we don't have anything up and running,” says managing director Amy Fredregill. Unable to find an insurance company willing to work with a group of farmers, the association is forming its own self-insured insurance company, something not legal to do in neighboring Wisconsin.

When the association first met with insurance companies to create a farmer pool, they were not interested, Fredregill says, so the association had to look at the concept of creating a self-insured pool. “To do that we would have to buy reinsurance,” she says. That means creating a new insurance model, and Congress has earmarked $4.5 million for five co-ops in Minnesota and Wisconsin to reach that goal. The plan the association is working on would use premiums to pay claims under $100,000 and reinsurance for claims above that. “We are now putting together the business plan” for creating the model, Fredregill says.

She has discovered that not everyone — that is, insurance companies — wants change. “It's been a very political battle,” she says. But she believes, in the long run, the association will be successful.

Self-employed group

A non-ag group that farmers can consider for health insurance is the National Association for the Self Employed, a nonprofit organization based in Dallas. “We're trying to reach more farmers,” says Vinetta Hobbs, field representative for the group. She says that members can join a health insurance membership group of 300,000. The Mega Health policy is available to farmers in the Midwest with the exception of Minnesota, she says.

The advantage of being part of such a large group is that members can't be singled out for rate increases, Hobbs says. Mega Health has plans that offer multiple deductibles so that clients can customize coverage. As a result, they can have lower deductibles on the frequency coverage with a high deductible on the catastrophic coverage. Coverage on the plans is 24/7 on and off the job. In addition, Hobbs says, “we offer a return of premium on our plan, where clients receive their payment back minus their claims at the age of 65.”

For more information, contact National Association for the Self-Employed, Box 612067, DFW Airport, Dallas, TX 75261-2067, 800/232-6273, or visit www.nase.org.

Iowa's Farm Bureau plan

In Iowa, the state's Farm Bureau Federation has teamed up with Blue Cross and Blue Shield to offer a group health insurance plan in which a majority of the state's farmers participate, says Dave Lyons, director of business development and former Iowa insurance commissioner.

“Yes, there is a health-care crisis, and it extends to agriculture,” Lyons says. “But we think we have put together a unique program that keeps costs low and offers more coverage. We have aggregated our members into a Farm Bureau pool. And we have lower administrative costs and operate the health plan as a nonprofit. All money we earn we put back into the program to reduce rates. In 2005, we reinvested $3.7 million.”

Farmers must qualify for the policy, and if they have an existing disease, the disease may be excluded from coverage. Asked about rates, Lyons says that, while every farm family situation is different, “on average, our program is normally 12 to 16% below what's out there.”

He adds that this year and next, health-care inflation will be higher than general inflation and the fact that the market expects more access combined with higher costs will put pressure on health-care insurers.

On average, he says, the claims of the Iowa Farm Bureau Federation pool are 1.5% lower than the industry average, due to the fact that farmers seek or have less access to medical care. But the focus of the federation is on a plan of wellness for subscribers.

HEALTH SAVINGS ACCOUNTS

MORE FARMERS are using Health Savings Accounts as a way to lower their health insurance premiums.

There are two types of medical risk — catastrophic and frequency — and HSAs can work well with both, says Dave Lyons, director of business development for the Iowa Farm Bureau Federation. Farmers can buy a health insurance plan with a higher deductible for less cost, to cover catastrophic risk, Lyons says, then put money in an interest-bearing HSA that they can use for more routine medical expenses. Lyons says that premiums on high-deductible plans may be as much as 40% less than those on other policies.

To qualify for an HSA, a health plan for a family must have a deductible that is, at minimum, $2,000 and at maximum $10,000, with the maximum annual HSA contribution of $5,150. For a single person, the minimum deductible is $1,000, the maximum $5,000, and the maximum allowable contribution into an HSA is $2,600.

State Farm

HSAs have brought new players into the health insurance market, including State Farm Insurance. HSAs offered through State Farm Bank are “a real growth area,” says State Farm's Jeff McCollum. “A lot of people are taking advantage of this.” He thinks HSAs have particular appeal for farmers and other self-employed people who face high premiums with a typical 80%/20% medical insurance plan.

Another advantage of HSAs, he says, is that if a farmer runs into a financial problem, he can take the money out, even though he has to pay a 10% penalty. He notes that money placed into HSAs can be withdrawn at age 65 with no penalty. Rules for HSAs are very similar to those for IRAs, he says, with the exception being that HSAs can be used at any time for medical costs.

For more information, contact your local State Farm agent or call 877/734-2265.

Harvest Health

In January Cargill announced its Harvest Health plan, in which it funds an HSA account for a grower if the grower agrees to sell grain to the Minnesota-based grain company. If a farm family of five, for example, chooses a health plan with a $2,500 deductible, Cargill will deposit up to $2,500 into the family's HSA account at Wells Fargo (Cargill's partner in the program) in exchange for the grower's commitment to sell 25,000 bu. of corn to the company at a maximum price of $2.50/bu.

The maximum amount Cargill will deposit into an HSA account is either the deductible amount or the federally mandated maximum amount, whichever is lower. The only requirement besides the agreement to sell Cargill grain is to have an HSA account through Wells Fargo. The high-deductible insurance part of the plan can be through any insurance company that the farmer chooses. The HSA money is like a premium, in addition to what Cargill pays the farmer for the grain. It also is tax deductible.

Cargill offers Harvest Health to the growers in an area from Minnesota to Texas and from Colorado to Tennessee for corn, soybeans, wheat and sorghum. “We are also working on a program for hogs,” says Mark Tracy, assistant vice president, Cargill Risk Management.

“We are very pleased with the customer response to date,” Tracy says. “We have signed up customers in 15 states as of our last update.” He says that one of the first Harvest Health customers was a successful farmer “who had never had a health insurance policy in his life. We have talked with farmers who are paying over $1,000 a month in health insurance premiums. Obviously there is a wide range of situations facing today's farm families, and we think an offering like this can help.”